A $1.5 Billion Band-Aid: Toronto's New Funding Deal and the DC Dilemma
AI-generated image · Bay Street Wire
The City secures a massive federal-provincial injection to slash development charges, but systemic affordability hurdles remain.
OPINION: A $1.5 billion injection is a start, but without a radical shift in how development charges are structured, this is just a band-aid on a systemic affordability hemorrhage.
According to a news release from the City of Toronto, the municipality has secured up to $1.5 billion through the Canada-Ontario Partnership to Build. This funding is designed to allow the City to reduce development charges (DCs) by 40 to 60 per cent between 2026 and 2029, depending on the unit type. This exceeds the initial program requirement of a 30 to 50 per cent reduction.
As reported by the City of Toronto, the funding is part of the Development Charge Reduction Program, which was first announced by the federal and provincial governments on March 30. The goal is to allow municipalities to lower the cost of development and improve project viability to increase housing supply while still funding the infrastructure necessary for growth. The $1.5 billion will be delivered over 10 years and will support projects already approved in the City’s 10-Year Capital Plan, specifically targeting road network expansion, water and wastewater infrastructure, and transit capacity.
On a broader scale, the City of Toronto notes that the Province of Ontario and the Government of Canada agreed in March 2026 to a cost-matched structure providing a combined $8.8 billion over 10 years for Ontario's infrastructure. Federal contributions are flowing through the Build Communities Strong Fund.
Beyond the direct funding, the City of Toronto is leveraging this financial certainty to launch a new phase of its Purpose-Built Rental Housing Incentives Stream. This program offers an indefinite deferral of development charges for projects that include at least 20 per cent affordable housing. The City aims to support up to 10,000 new rental homes through this phase, including a minimum of 2,000 affordable units. This follows a first phase launched in fall 2024 that supported over 8,000 rental homes, including more than 2,000 affordable ones.
The City of Toronto further detailed that it has already contributed $1.2 billion as of 2026 Q1 toward reducing development costs. These efforts include:
– Freezing development charges at 2024 levels for 2025 and 2026.
– A 15 per cent property tax rate reduction for new multi-residential properties via a New Multi-Residential (Municipal Reduction) Property Tax Subclass.
– DC exemptions for multiplexes with up to six units.
– The Home Ownership Assistance Program, which provides DC exemptions for eligible homes.
– The Toronto Builds and Affordable Rental and Rent-Controlled Housing Incentives programs, which provided DC exemptions for 946 rent-controlled homes and various incentives for 5,956 net new affordable rental homes.
– The Rental Housing Supply Program, which provided indefinite DC deferrals for up to 6,128 market rental units and full exemptions of property taxes, charges, and fees for 2,024 affordable housing units.
Mayor Olivia Chow stated that the announcement is intended to make it easier for people to afford homes in the city while creating tens of thousands of jobs.